Here’s the big picture: your child could be the next great scientist, firefighter, electrician, teacher, forester, or video game developer. Right now all of these opportunities are open to your child. All of these jobs also require education beyond high school.
The big picture’s important. It helps you understand the future you’re planning for your child. It’s a future that involves paying for additional education. The big picture can also seem overwhelming. Though that first tuition bill is years down the road, paying for school requires planning.
While there is a diverse range of types of education after high school, we use “college” as the simple term to refer to post-secondary institutions. Continuing education after high school doesn’t have to mean a traditional 4- or 2- year college, it can also mean technical training or other certificates that lead to successful careers. No matter the type of post-secondary education, all of these options require prior planning and a financial investment.
There’s a lot you can do right now to ensure that all your child’s dreams – present and future – can come true. These resources will help underscore the importance of saving for college and provide practical tips to help make saving for college a reality.
What does it mean to save for college?
Saving for college means setting aside money for your child’s future college education. Being a college saver isn’t just a one-time thing; it’s an identity. Saving for college requires a commitment to investing in your child’s future through regular contributions to a college savings account.
Why save? And why save now?
Every dollar saved is a dollar you don’t have to borrow and repay with interest. While there are many ways to pay for college – through financial aid, loans, scholarships, work-study, and saving – saving is the one avenue you can directly affect throughout your child’s development.
The earlier you start saving, the more time the money has to grow. Whether you choose to invest your college savings or simply let it accrue interest, the earlier you start saving the more potential that money has to grow.
Children who have money saved for college are more likely to enroll and graduate from college. If your child has more than $500 in savings designated towards education, he or she is 5x more likely to enroll in and graduate from college. It’s all due to mental accounting – knowing the money is to be used for education increases your child’s expectation that he or she will attain that education
Regardless of family income, students who have money saved for college do better in school
How do I save?
There are many different ways to save for college
You’ll need to decide what type of savings account or plan makes the most sense for your family.
Regular Savings Accounts Open a savings account with your bank or credit union and start setting aside some money when you can. Birthdays and holidays are a great time to ask family members to help!
Investment Accounts There are several kinds of investment accounts that can be used for college savings: IRAs (including Roth IRAs), Coverdell Accounts and 529 Plan accounts. Each has its own advantages and disadvantages. Do some research, talk with the experts and see if one of these accounts might be right for you.
Savings tips to help you get started
Even if you understand the importance of saving for your child’s future education, it can be challenging to fit saving for college into your budget or routine. Check out some of these tips and tricks to become a more effective saver.
- Make your savings goal-oriented. Set savings goals with definitive timeline and monetary goals. It’s easier to meet a goal of saving $500 a year or $100 a month than the broader goal of “saving.”
- Set up automatic transfers from your paycheck into your college savings account.
- Figure saving for college into your regular budget, like paying for household bills or saving for retirement.
- Redirect unscheduled additions to your income directly into savings. This could include raises, tax refunds, or bonuses.
- If a regular expenditure ends (such as daycare or car loan payments), reassign that extra money in your budget directly to savings, before you have a chance to get used to the extra spending money.
- Avoid impulse purchases.
- Save money by bringing your lunch, borrowing books and movies from the library rather than renting them, carpooling, using coupons, or shopping sales.
- Track your spending and saving via a notebook, spreadsheet, or smartphone app.
- Make saving a group effort. Involve your family and friends by encouraging contributions to your child’s college savings account for birthdays, holidays, or other significant milestones.
- If you have a 529-plan, take advantage of the incentives or matching funds it may offer.
- Start early. Procrastinating on your child’s college savings account will mean you’ll miss out on interest and growth on your money.
No matter how you save, you should feel confident in the investment you’re making in your child’s future. Every dollar saved is a dollar you don’t have to borrow later and repay with interest.
What else can I do?
Children pick up the financial behavior of their parents. Modeling responsible financial behavior throughout your child’s development will help them make responsible financial decisions as adults. Check out the Pre-K – 5Th Grade Students section for relevant conversation starters and activities related to college and college savings.